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At the closing of a real estate transaction, a crucial step involves the payment of various fees by both the buyer and seller. This guide sheds light on the common costs associated with closing, offering insights into how these fees are typically divided.
1. Real Estate Commissions
Typically ranging from 5-6% of the sales price, real estate commissions are negotiable. The cost is borne by the seller, totaling $20,000-$24,000 for a $400,000 home.
2. Loan Origination Fees
Covering the lender's administrative costs, this fee is paid by the buyer and is usually 1% of the loan amount, equating to $3,500 for a $350,000 loan.
3. Title Search
Ensuring the property is free and clear of any liens, this cost of $150-$250 is shouldered by the seller.
4. Home Inspection
Buyers may opt for an inspection (costing $250-$700) to identify potential defects in the home, with the buyer covering the expense.
5. Pest Inspection (for termites and dry rot)
The cost of $75-$150 for pest inspection is covered by the seller.
6. Home Appraisal
To confirm the home's fair market value, buyers pay an average cost of $350.
7. Title Insurance
Both owner's and lender's title insurance costs (ranging from $500-$1,000) are shared between the buyer and seller.
8. HOA Transfer Fees
Ensuring current dues, fees of $200-$250 may be split 50/50 or covered entirely by the seller.
9. Home Warranty (1 year)
Though not mandatory, sellers cover the $300-$500 cost to offer protection on major home systems.
10. Real Estate Transfer Tax
Varied by location, this cost is borne by the seller.
11. Escrow Deposit for Property Taxes and Mortgage Insurance (2 months)
Buyers cover this cost, which varies based on the home's price and location.
12. Homeowners Insurance (premium for the first year)
With an average cost of $1,300, buyers pay for coverage against potential home damage.
13. Closing Fee or Escrow Fee
Paid to the title company, escrow company, or attorney, this cost (typically 1% of the sales price) is split equally between the buyer and seller.
Additional Fees:
Other potential fees in the transaction may include a loan application fee, underwriting fee, survey fee to determine property lines, or natural hazard disclosure reports.
Understanding these costs empowers both buyers and sellers to navigate the closing process with clarity and confidence. For personalized advice tailored to your unique situation, consult with your trusted real estate professional.
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